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Insurance Companies Accelerate ETF Investments

Research from Greenwich Associates and State Street Global Advisors uncovers a surge in ETF adoption by insurance companies. What's driving the increased use of ETFs? Read the report to find out.


3 Key Takeaways

In a survey of US insurance companies, Greenwich Associates asked respondents about their use of exchange traded funds (ETFs) and found:

1    The majority of insurance companies use ETFs —and expect to increase usage in the future.

  • 62% of study participants invest in ETFs in their general accounts.
  • 61% of current ETF investors expect to increase their ETF allocations in the next three years.
  • 82% of non-users expect to reconsider investing in ETFs in the next three years.

2    Insurance companies’ use of fixed income ETFs has accelerated.

  • The April 2017 decision by the National Association of Insurance Commissioners (NAIC) to allow insurers to apply the bond-like accounting treatment of “systematic value” to fixed income ETFs appears to have been a catalyst for growth, with a 69% increase in fixed income ETF assets from 2016 to 2017.1
  • One third of insurers now use ETFs for core fixed income and modifying exposures; that share is expected to jump to 47% in the next three years.
  • 29% of respondents use ETFs to target specific opportunities, expected to increase to 42% in three years.

3    ETFs support a broad range of applications, across company size and type.

  • Life companies use more fixed income ETFs (83%); P&C companies use more equity ETFs (92%).
  • Smaller insurers primarily use ETFs as strategic allocations, whereas larger companies use ETFs for both strategic and tactical portfolio management.
  • The most common applications for ETFs are eliminate cash friction (47%), optimizing asset allocation (45%), core equity and beyond (42%), implementing liquidity sleeves (34%), core fixed income and modifying exposures (34%).

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Considering ETFs?

Resources to guide your decision making

NAIC Designations

Consult the SPDR® ETF Listing for Insurance Companies.


Systematic Value

Check our math on adjusting book value based on differences between forward looking cash flows and fund distributions.


Relevant SPDR ETFs

SPMB

NAIC 1

SPDR Portfolio Mortgage Backed Bond ETF

Provides low cost access to agency mortgage-backed pass-throughs guaranteed by GNMA, FNMA and Freddie Mac.

FLRN

NAIC 1

SPDR Bloomberg Barclays Investment Grade Floating Rate ETF

For short-term liquidity needs and potential risk mitigation, floating rate investment-grade notes may provide some yield, but at a lower duration risk than fixed rate exposures.


SPIB

NAIC 2

SPDR Portfolio Intermediate Term Corporate Bond ETF

Provides a more targeted exposure to the intermediate corporate bond segment by focusing on the 1-10 year maturity bucket.


SRLN

NAIC 4

SPDR Blackstone / GSO Senior Loan ETF

An actively managed senior loan portfolio that monitors credit quality rather than following a passive loan index that does not emphasize credit selection.


State Street Global Advisors

A leader in fixed income index investing:


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